Moreover, as of this writing in late 2013, the administration, the
House of Representatives and the Senate are considering increases
to agency R&D budgets; the 1.5% growth figure noted above is the
least among proposals under consideration.

Actual research expenditures in 2013 are also an important input
to the 2014 Forecast. Though many individual firms and some
industries increased their investment, industry investment in R&D
as a whole was flat in 2013 due to the slow global economy, continued rationalization of R&D activities in selected industries and the
private-sector impact of federal budgets and sequestration. The se-quester-associated reductions in 2013 U.S. R&D had a pronounced
effect on university research activity, among other areas. Industries
that supply and support the federal government, notably aerospace,
defense and security, were also subject to funding reductions and
increased uncertainty. The impact on revenue led many firms to
restrain internal R&D activity in 2013, and these cautious strategies
are likely to continue in 2014.

Excluding federal R&D funding that flows through the private sector via grants, internal R&D cost recovery and other mechanisms,
industry R&D funding is projected to rebound from 2013, increasing by 4.0% to $307.5 billion in 2014. The information and communications technology (ICT) sector will continue to be a particularly strong contributor.

There is historic evidence, including in recent years, that industrial
R&D spending is correlated with the current economy and the stability of its outlook. Any economic destabilization from government
shutdowns or defaults, international conflict or other factors could
change the trajectory of private-sector R&D spending in 2014.

Where Nearly a Half-Trillion R&D Dollars are Spent

The “performers” of research are identified by the NSF through
surveys of R&D expenditures. The “Source-Performer Matrix”
on page 38 describes not only who will fund, but also who will
consume R&D funding in the U.S. in 2014. The matrix is modeled on the NSF’s National Patterns of R&D Resources, as well as the
most recent data (2011) from the NSF’s Business R&D and Innovation Survey (BRDIS).

Increased industry investment equates to more R&D activity, which
is projected to increase by 3.8% to more than $330 billion, or more
than 71% of the U.S. total. While about 8% of industry R&D activity is funded by the government (particularly the Department of
Defense), most of the funding originates in the private sector and is
correlated with the business cycle and economy rather than government actions.

As a group, the nation’s research universities are the second largest performer of U.S. R&D, accounting for 13% of the U.S. total,
and more than half of all U.S. basic research. With nearly 60% of
their R&D budget coming from the federal government, the recent
dynamics of federal R&D funding, from increases via the American
Recovery and Reinvestment Act (ARRA) investments in 2009-2011
to budget reductions in 2012 and sequestration in 2013, are causing some institutions to seek diversification of their R&D funding.
From all sources, academic R&D performance is forecast to increase
by 2.2% to nearly $63 billion in 2014.

Federal intramural research performance is forecast to reach $35.7
billion, or nearly 8% of all U.S. R&D, in 2014. When federally
funded R&D centers (FFRDC) are taken into account, R&D worth
$52.7 billion will be performed under close programmatic control
of the federal government. Among the thirty-nine FFRDC’s are the
U.S. national laboratories, many of which are operated by contractors. Through basic and applied research, these globally recognized
institutions pursue missions in energy, security and other areas of
national importance.